The Commodity Futures Trading Commission (CFTC) has filed an enforcement action against Binance’s CEO, Changpeng “CZ” Zhao, and three related entities over allegations that the company knowingly offered unregistered crypto derivatives products.
The CFTC lawsuit accuses Binance of actively soliciting users and subverting compliance controls. The filing claims that Binance uses an “intentionally opaque” operating structure “with Zhao at the helm” and that Samuel Lim, the former chief compliance officer, aided and abetted Binance’s violations. The CFTC alleges that Binance “solicited both retail and institutional customers despite not being registered to do so.”
The lawsuit is the latest in a series of enforcement actions taken against crypto firms in the US. Last week, the Securities and Exchange Commission (SEC) clamped down on rival Coinbase’s staking operations in the country. CFTC Chairman Rostin Behnam warned that the filing should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law. He accused Binance of violating CFTC rules for years, working actively to keep the money flowing while avoiding compliance.
The Illinois filing claims that Binance’s reliance on a maze of corporate entities is deliberate and designed to obscure the ownership, control, and location of the Binance platform. The filing added that “Zhao answers to no one but himself.” The CFTC’s lawsuit underscores the importance of compliance in the crypto industry and the need for companies to operate transparently and within regulatory boundaries.
